U.S. Xpress Enterprises (NYSE:USX) Will Want To Turn Around Its Return Trends

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating U.S. Xpress Enterprises (NYSE:USX), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for U.S. Xpress Enterprises:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.011 = US$10m ÷ (US$1.3b - US$425m) (Based on the trailing twelve months to March 2022).

Thus, U.S. Xpress Enterprises has an ROCE of 1.1%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 14%.

See our latest analysis for U.S. Xpress Enterprises

Above you can see how the current ROCE for U.S. Xpress Enterprises compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for U.S. Xpress Enterprises.

What The Trend Of ROCE Can Tell Us

In terms of U.S. Xpress Enterprises' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 1.1% from 6.1% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On U.S. Xpress Enterprises' ROCE

While returns have fallen for U.S. Xpress Enterprises in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And there could be an opportunity here if other metrics look good too, because the stock has declined 42% in the last three years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

U.S. Xpress Enterprises does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.